Among analysts, the consensus is that wealth management is a growth industry. Over the next decade, the future for the industry will be bright. For instance, Bain & Company expects the wealth management market to double in size, exceeding $500 billion in revenues by 2030, according to one study.
“Bain & Company projects a $90 trillion increase in liquid assets from all investors globally, from 2021 to 2030, with $40 trillion coming from individuals who have assets between $100,000 and $1 million,” explains the report. “The Americas and Asia-Pacific will lead the charge.”
By understanding the drivers of this growth, wealth managers can better tap into market opportunities for their own businesses.
Here are some signals that our team at CircleBlack is monitoring.
1. Worldwide growth of high net worth individuals
In the wealth management industry, growth was in motion well-before the COVID-19 pandemic. Driving this trend has been the number of high net worth individuals with investable assets. According to a 2019 Ernst and Young report, global growth is powering this trend. Some wealth management firms are well-positioned to expand internationally due to their expertise, to reach clients around the world.
2. Millennial and Gen Z preferences
Demographic shifts are creating new customer segments for wealth managers, according to a recent Bain and Company analysis.
“75% of wealthy millennials consider environmental, social and governance (ESG) to be an important factor in investment decisions,” the study’s authors write. “Bain & Company projects that ESG-related assets will compose about 46% of all assets under management by 2030, up from 33% today.”
Young investors know that their wealth has power. The right financial advisor can help provide step-by-step guidance for how to reach investing sustainability goals.
3. Acceleration of digital interactions
According to a report by KPMG, digital transformation is opening doors for the adoption of new business models. Embracing data and insight driven strategies, financial advisors can offer tailored products and services, outside traditional business models.
“This high-volume and mass-market/affluent model offers convenient, seamless, digital-first customer engagement and ‘low-cost, high-value’ products and services,” explains the report. Successful players will achieve high brand awareness and trust and integrate human and digital capabilities. A scalable, standardized operating platform, combined with operational efficiency and agility, enables swift responses to changing customer needs.”
With technology, financial advisors can better define their key customer segments. Opportunities to offer value, especially in the form of new products and services, increase as a result.
4. Rising alternative investment opportunities
Increasingly, people are taking interest in new types of investment vehicles. According to Allied Market Research, these include:
- Private equity
- Commodities
- Hedge funds
- Real estate investment trusts (REITs)
- Intellectual property
Additional investment pathways include cryptocurrencies, business investments, and even the securitization of art. Financial planners have the true expertise to make sense of it all.
5. Diversity & inclusion
Thanks to civil rights movements and overall economic expansion, more people are able to participate in wealth creation. Consider recent startup IPOs, as examples, which have resulted in financial windfalls for employees
Across age, gender, race, and other demographic variables, more people are finding their way to financial prosperity. Not to mention, demographics in Western countries are shifting, generally.
Wealth managers will benefit from attracting more diverse customers, according to a recent article from The Financial Times.
Final thoughts
It’s a promising time to be a wealth manager or financial planner. The future is bright, and there’s plenty of opportunity to build a thriving business. The key is to focus on long-horizon prosperity that is timeless to the ups and downs of our present moment.
Demographic shifts point to a more inclusive industry. The resulting diversity means that more people are building wealth, overall. Given these market evolutions, financial advisors have the potential to become thought partners in the eyes of their clients. Inclusivity is a value multiplier for firms.
Learn more about CircleBlack
CircleBlack is an all in one management platform for the wealth management industry. You can think of it as an operational dashboard to better connect financial advisors and their clients around a shared perspective. The outcome is better collaboration.
To learn how our software can help you build, manage, and grow your wealth management practice, get in touch.
Disclosures
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.